Careful with investing in mining regions

Aussies could use a reminder that a good location is a key to successful property investment. This, after a new study from Property Investment Professionals of Australia (PIPA) showed that property prices had halved in many mining regions over the past decade.

PIPA Chairman Peter Koulizos is in the process of re-examining research he undertook for a book published in 2008, and, as part of the new research, Koulizos examined CoreLogic’s data to calculate the best and worst performing areas over the past 10 years. From there, he found a clear frontrunner for bottom of the pile – mining locations.

“What this data shows us is that if you had bought property in one of these towns, not only did your property not increase in value over this 10-year period, but it is actually worth less,” Koulizos said.

“West Australia (WA) – which benefited the most from the mining boom – has also suffered the most from the mining bust.”

Koulizos noted that there a lot of underperforming mining towns in WA, but the worst was South Hedland, a suburb in Port Hedland. The area saw house prices drop by 74.8% over the period.

Newman came in a close second – this town in Pilbara, whose median house price used to be $501,000 in 2008, currently has a median of only $147,000.

Queensland mining towns and their suburbs were also among the lower performers.

Gladstone, meanwhile, had been promoted by many property spruikers. Unfortunately, findings reveal that they have come unstuck.

“South Gladstone house prices fell by 31.7%, and West Gladstone house prices fell by 47.6% over that time period,” Koulizos said.

“However, these two suburbs are not the worst performers. Property prices in the mining town of Dysart fell a whopping 77.4%, while at the same time Brisbane house prices increased by 24%.”

Roxby Downs in South Australia joined the ranks of underperforming locations as it house prices have declined by 36%, while its sales have sunk from 140 in 2008 to just 51 in 2018.

As an ending, Koulizos underscored the importance of closely evaluating the location before deciding to capitalise on any property.

“It’s important to understand that buying property outside of capital cities still makes financial sense. In fact, there are many regional and country areas that are deserving of your investment dollars,” Mr Koulizos said.

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